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Hi all,

I am trying to decipher the HMRC's Foreign Tax Credit Relief working sheet (FTCRWS) but am getting no where fast.

Before moving to the UK, I want to work out what (if any) my tax liability will be for income from property in Aus. The SA106 form and notes are straight forward - however I want to make sure I am calculating the 'tax credit' for tax that will have been paid in Australia correctly.

Guessing simply converting the AUD tax payable into GBP and putting it on the form won't cut it?

I think the Australian credits will mean no net tax in UK but want to be sure that I am doing this right.

Any advice, links, referrals to someone who knows would be welcome.

Thanks all!
 

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I am not familiar with the form in question, but it appears that its aim is to determine the pro-rata tax due on components of your income to help determine the proportional limit of the tax credit..

So... hypothetically...

If you had a global income of 100,000 GPB ; of which 10,000 was foreign sourced and the tax rate was 25% across all of it, then the the portion of the tax bill related to the foreign sourced income would be 2500. Thus the foreign tax credit you could claim would be limited to 2500 GBP.

These calculations can get complicated, where different types of income are taxed at different rates.

So, no, just converting isn't quite right... that worksheet is basically trying to calculate the maximum credit you can claim on SA106.

So.. using the sums above

If the UK tax on that rental income was 2500 GBP then you would only be able to claim a tax credit of 2500 GBP even if you paid to the ATO the equivalent of 3000 GBP of tax on the rental income.

If it was the other way round and the Oz tax was the equivalent of 2000 GBP then you would still be on the hook for the additional 500 GBP to HMRC.

When figuring out what you might owe to HMRC bear in mind that once you are no long a tax resident of Oz, tax rates are different.

https://www.ato.gov.au/rates/individual-income-tax-rates/#Foreignresidents
 
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